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Bills Introduced to Make Merit Pay Amendments to Labor Law

Twin bills introduced in April 2012 and making their way through Congress would amend the National Labor Relations Act (NLRA) to reform the collective bargaining process and allow employers to give merit-based bonuses, raises and other increases to an individual employee above the level set by the employee’s union contract.

On April 18, 2012, Rep. Todd Rokita, R-Ind., introduced H.R. 4385, the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act, in the House of Representatives.

“Unions usually do not allow companies to reward individual performance, instead preferring seniority systems and job classifications that apply to all workers,” James Sherk, senior policy analyst in Labor Economics at the Heritage Foundation, told
SHRM Online. The problem is that group compensation divorces pay from performance, Sherk said.

Specifically, the bill would seek to insert into the NLRA: “nothing in either section 8(a)(1) or 8(a)(5), or a collective bargaining contract or agreement renewed or entered into after the date of enactment of the RAISE Act, shall prohibit an employer from paying an employee in the unit greater wages, pay, or other compensation for, or by reason of, his or her services as an employee of such employer, than provided for in such contract or agreement.”

Rokita argued in an op-ed article in the
Washington Examiner that the National Labor Relations Board has ruled that giving out individual bonuses and raises constitutes “direct dealing” and that the board has the authority to reject any pay increases given to union workers that are not negotiated by unions. Rokita said that this doesn’t give workers an incentive to do well in their job and that they need some incentive to compete in the global economy.

“There are more than 8 million Americans for whom this is reality,” Rokita said. “They work under contracts that are negotiated by labor unions and protected by federal law that forbid raises for individual employees no matter how exceptional their work ethic and job performance may be. These contracts set a floor and a ceiling to employees’ wages and effectively discourage hard work by taking away the best incentive an employer can offer. How can we expect American businesses to be competitive in a 21st century globalized economy under such a system?”

Rokita said that the RAISE Act would not alter existing contracts but would allow employees to earn pay raises and bonuses under future contracts.

According to the Heritage Foundation and the U.S. Bureau of Labor Statistics, a worker’s average earnings rise between 6 percent and 10 percent when they are eligible for performance-based pay. Allowing union members to earn such performance pay would mean significant raises—between $2,600 and $4,300 a year—for the typical union member, Rokita said.

Rubio, seen as a possible vice presidential candidate for the GOP in 2012, echoed Rokita.

“It is a sad day in America when, no matter how hard an employee works, he or she is blocked from higher earning potential,” Rubio said. “This bill fixes this arbitrary ceiling placed on these workers and allows the free market to function as it is supposed to,” he added.

The House version of the RAISE Act has been referred to the House Committee on Education and the Workforce. The Senate companion bill has been sent to the Senate Committee on Health, Education, Labor and Pensions.